Eurozone Contracts: Considerations For GCC Entities

The economic crisis in Europe could have unforeseen consequences for GCC entities that are party to Euro-denominated contracts. Unless specifically provided for under those contracts, uncertainty will arise as to how Euro-denominated contracts should respond where a European party's member state exits the Eurozone. Engaging with counterparties in advance will avoid this uncertainty.

For the purposes of this guidance it is assumed that if a country exits the Eurozone it is likely to be one of the weaker economies and to re-denominate contracts from Euros to the new currency on a 1:1 basis. There are, however, other scenarios which could transpire, including that the Euro could cease to exist altogether.